Housing the poor

In limbo

Britain is quietly moving towards a new way of housing the poorest

FOR a government that claims to be the scourge of poverty and social injustice, it looks like an embarrassing failure. When Labour came to power, in 1997, some 44,000 poor households were awaiting a permanent place to live. Since then, unemployment has fallen and prosperity increased, yet the number of homeless households has topped 100,000 (see chart). A blot on the record, yes, but one that conceals a more fundamental change. Britain is moving, albeit messily and reluctantly, towards a new and potentially better way of housing the needy.

Though formally homeless, few of those who lack settled abodes sleep on the streets, nor do many live in dingy hotels or hostels. Both fates are now rare, thanks to government pressure on local authorities and the homeless (rough sleepers are hassled until they agree to live under some kind of roof). Most have qualified for state housing because of poverty and vulnerability, and are housed in a variety of places while awaiting their turn.

The queue is lengthening not because there are more needy people, but because fewer cheap houses and flats are available. Under the right-to-buy scheme launched by the last Conservative government, many of the largest and best council properties have been sold to tenants at discounted rates. That allowed many to amass equity for the first time and opened a route to the middle class. But it also means a smaller safety net for the poor.

The problem is starkest in the costly London borough of Westminster, where demand so exceeds supply that it is virtually impossible to obtain social housing unless you have been certified as homeless, according to Rosemary Westbrook, the borough's housing director. Some 3,100 households in Westminster await a permanent council home—up from 1,700 in 1997-98. Waiting times are long: those who want a four-bedroom property can expect to hang around for six years. Their “temporary” accommodation is beginning to look permanent.

In the past few years, an increasing proportion have been biding their time in private housing, most of it arranged by local authorities but some leased directly from landlords. Tenants pay rent and recoup the outlay through housing benefit. That is, in some ways, an excellent solution. Private housing is both more flexible than social housing and more dispersed: pockets of deprivation like those found on council estates are less likely to emerge.

The trouble is that people who rely on housing benefit have little incentive to work, at least in the legitimate economy. The handout is sharply tapered, meaning that it decreases rapidly for every extra pound earned. Marginal tax rates for those who receive it often touch 90%, and in areas of high rents people must earn a middle-class salary before the disincentive to working disappears.

Despite government pledges to build more of the stuff, there will never be enough social housing. The solution is to smooth the transition to the open market, and encourage those who are able to fend for themselves to move on. In encouraging private-sector provision for the poorest, Britain is taking the right course. Too bad it is penalising work.